Luxury Travel: Full Speed Ahead
Luxury travel is booming according to new research presented in December at the International Luxury Travel Market in Cannes. In most countries across the world, luxury travel is one of the best performing sectors of the travel business with many countries currently enjoying between 10 and 20 per cent annual growth.
Luxury travel is booming according to new research presented in December at the International Luxury Travel Market in Cannes. In most countries across the world, luxury travel is one of the best performing sectors of the travel business with many countries currently enjoying between 10 and 20 per cent annual growth. New research by ILTM indicates the luxury travel industry as a whole is booming, with huge growth in developing markets such as India, Russia and China. The global luxury travel industry now comprises an estimated 25 million annual arrivals, accounting for 25% of international tourism spend.
The global luxury travel business now comprises an estimated 25 million annual arrivals (3% of total international arrivals) accounting for 25% of international tourism spend – at least US$180 million. On average, spend per trip is estimated at between US$10,000 – 20,000.
The luxury travel boom is being fuelled by the increase in High Net Worth Individuals (HNWI) – those with at least US$1million in net financial assets – and also by the growth in their individual wealth. According to the World Wealth Report (Merrill Lynch and Capgemini), the number of HNWI grew by 8.3 % in 2006 and their individual wealth grew by 11.4%.* Wealth is concentrating to an even greater extent amongst Ultra High Net Worth Individuals (Ultra HNWI) – those with financial assets worth at least US $30 million – whose number increased by 11.3 per cent in 2006 with their assets growing by 16.8 per cent.
Privacy appears to be top of the agenda amongst this affluent group with private air travel increasingly being perceived as a “necessary luxury”. NetJets claims 40 per cent annual growth and the broker Marquis Jet has doubled its business every year for the past three years. Just one small airport in the UK, Farnborough, recorded a 26 per cent increase in flights in the first quarter of 2007.
Private islands, luxury yachts and exclusive use of hotels or private houses are also highly sought after. In addition, the research reveals that these people are looking for spiritual well-being and unique, authentic experiences.
Philanthropic travel and an increased demand for learning were also highlighted as being much in demand. In the mature markets of the USA and Europe there is a move away from conspicuous consumption to a more “low-key” luxury.
Over 3,000 luxury travel industry leaders convened at the sixth International Luxury Travel Market (ILTM). An unprecedented 750 delegates attended Monday’s opening Conference on climate change, which highlighted the need for the luxury travel industry to embrace the challenge of responsible tourism in order to survive and progress.
Ed Ventimigilia, Senior Vice President and Publisher of Departures magazine (ILTM sponsor) stated: “I was both pleased and inspired by the caliber of speakers and their knowledge in the critical area of climate change and its impact on luxury travel. From learning about the complex issues behind carbon offsetting to hearing about the tangible ways that hoteliers, such as Six Senses, are offering their guests more choices for sustainability, the conference presented the vast challenges being faced by luxury travel industry. I was pleased to hear about a number of luxury travel companies that are making great strides in this area.”
“What is next is for both travel and luxury-related companies to weigh these valuable insights and options and adopt practices that will begin to lessen their impact on the environment. Clearly we have a long way to go in enhancing our collective business practices; however, each step in the right direction, is an important step… it’s evolution, not revolution. The conference panelists and speakers reiterated this in what I believe was an important day of dialogue and inspiration.”
Ventimiglia continues: “Our audience of 765 attendees this year (versus 400 attendees last year) was a testament to the importance and vast interest in the issue of climate change and the impact of global warming on the luxury travel industry. I was particularly struck by the interaction of the audience that revealed the range of knowledge and understanding on this broad topic. While some participants asked extremely savvy questions or had specific comments, for instance regarding carbon offsetting, other attendees asked basic questions, such as “what is the definition of sustainability?” and “how do I go about signing up for a carbon offset — what is the process?” Again, this interest reflects the need for bringing these issues to the forefront.”
With the size of the travel industry set to double in the next 15 years, keynote speaker Costas Christ, founder of The International Ecotourism Society, highlighted that the issue of climate change is only going to get bigger and luxury travel companies must acknowledge this. “We’re on the frontier of something new – responsible tourism is not a possibility but a reality and is a sound business approach,” he commented. There is increasing awareness of climate change amongst this group but luxury travelers have, to date, done less than their less affluent compatriots to adjust their travel habits or offset their personal footprint in any way. The research reveals that so far, so called “green” initiatives are primarily driven by suppliers and there is a patent need for improved engagement between the customer and travel supplier.
Ventimigilia commented about Christ’s presentation: “I was particularly interested in the details of carbon offsetting as well as Costas Christ’s keynote about how sustainable tourism is transforming the travel industry. According to Costas, it’s not if, but when; he talked about how responsible tourism needs to be embraced as a reality. I also appreciated Concetta Lanciaux’s (Strategic Luxury Goods Adviser, Groupe Arnault) insightful talk about how LVMH’s (Moet Hennessy.Louis Vuitton) business practices are based on leveraging the attributes of man and nature versus machine.”
The Conference illustrated a growing number of luxury travel companies are making progress in the realms of responsible tourism, be it through carbon offsetting policies or other environmental projects. However, it was evident that there is still scepticism surrounding the issue and many companies are yet to implement their own policies. The 60% increase in Conference delegate numbers over last year indicates the industry is conscientious and eager to address the challenge.
Departures’ own annual Luxury Advisory Board (LAB) report on luxury travel trends, announced at ILTM, reveals that environmental friendliness is important to half of respondents in selecting a hotel or resort. Along these lines, LAB respondents take more “eduventures” — trips that combine education and adventure. They are taking fewer trips but staying at their respective destinations longer.
The LAB consists of more than 2,500 Departures readers who voluntary provide insight into their behaviors, preferences and choices. Because Departures readers travel so extensively, this information offers tremendous insight into the luxury travel trends. Departures European Readers Survey shows that about 1 in 4 of our European readers plans to stay in an eco-hotel in the coming year. Clearly, these eco-conscious sentiments reinforce the need to have further discussion and action about sustainable tourism, which is becoming more important to a growing number of luxury travelers here in the U.S., and abroad.
Baby Boomers (those born between 1946 and 1965) are now the most important age group (in terms of volume and spend) for the luxury travel market but are quickly expected to be overtaken by Generation X (born between 1966 and 1979). It is Generation X that is driving the significant growth in multi-generational travel. The Trend Setting Millennials (born from 1980 onwards) have much higher expectations and are more confident and better informed than their elders.
Though on the whole the luxury sector of the travel industry is growing at a far greater pace than mainstream travel, the industry naturally faces challenges and ILTM’s research brought these into focus. Ever-shortening lead times for client bookings are a leading concern for 98% of respondents, while for exhibitors it’s reaching the right audience and retaining and expanding their client base that keep them awake at night.
ILTM commissioned its first luxury travel industry report to give the industry a global overview and insight into the size, growth, trends and issues affecting luxury travel. ILTM surveyed over 1,500 of its VIP buyers on issues relating to general luxury travel trends, changing demographics within the luxury travel client base, as well as environmental and security issues. Respondents included a broad cross section of global tourism and travel companies, from high street travel agents to events organisers.
Brad Monaghan, Marketing Manager of ILTM, commented; “Our research reveals luxury visitor numbers and expenditures are on the rise globally, with companies experiencing an average 17.5% increase in client numbers and a 16% increase in client expenditure. Despite the number of emerging luxury travel destinations around the globe, it’s interesting to note that Italy remains the leading choice for discerning travellers, with Europeans as well as amongst developing luxury travel markets such as China, Russia and India.”
According to the ILTM research, other destinations tipped to be in strong and growing demand over the coming year include the United Arab Emirates, Thailand, Vietnam and China.
In contrast, the destination experiencing the biggest decrease in requests by luxury travellers is North America, despite other markets rebounding to the States with renewed confidence. Security concerns, issues with immigration, difficulty obtaining Visas and a general negative perception of the US were the major reasons cited for the country’s plummeting popularity on a global level.
ILTM 2007 welcomed over 3,500 attendees from an increased 110 countries worldwide, who partook in 47,000 pre-matched appointments. Newcomers at the event included The Valencia Tourism Convention Bureau, Slovenian Tourist Board and the Luxury Train Club, plus a number of new exhibitors from Japan. The trend in luxury travel is Evolution and Revolution.